SAN FRANCISCO (Reuters) — Intel Corp <INTC.O>,
hit by slumping personal computer sales, has put off opening a major
chip factory that President Barack Obama once held up as an example
of U.S. manufacturing potential.

The "Fab 42" facility built in Chandler, Arizona, originally slated
as a $5 billion project that in late 2013 would start producing
Intel's most advanced chips, will remain closed for the foreseeable
future while other factories at the same site are upgraded, said
Intel spokesman Chuck Mulloy.

Intel's decision not to open the chip plant was first reported by
the Arizona Republic on Tuesday.

"The new construction is going to be left vacant for now and it will
be targeted at future technologies," Mulloy told Reuters.

Despite not opening the new factory, or fab, Intel has exceeded a
target to hire over 1,000 employees since construction started in
2011, Mulloy said. Intel received state tax benefits for hiring
those people.

Obama, while campaigning for re-election in 2012, made a stop at the
factory's construction site, where he called for government
incentives to attract manufacturing lost to Asia in recent years
back to the United States.

Intel is the world's top chipmaker but it was caught off guard by
smartphones and tablets, a computing revolution that has cut into
demand for PCs, the company's core business.

Global PC shipments fell 10 percent in 2013, the worst year since
market research firm Gartner began tracking those products.

"The newer fab has not been equipped with the capital equipment. It
has heating and air conditioning but the actual tools, the expensive
stuff, are not in there," Mulloy said. Much of Intel's strength has
historically come from its chip manufacturing technology, which is
the most advanced in the world and is ahead of rivals by around two
years.

Intel originally meant to install its most advanced manufacturing
technology at the plant and make 14 nanometer microchips with
transistors so tiny that over 100 million of them could fit on the
head of a pin.

Existing factories at the Chandler site using Intel's previous
generation of manufacturing, 22 nm, are being converted to also make
chips at 14 nm and many of Intel's new employees are working there,
Mulloy said.

The Santa Clara, California-based company says it makes around two
thirds of its microprocessors in the United States, with others
produced in Ireland, Israel and China.

It is currently expanding a plant in Oregon where engineers will
work on a long-term plan to manufacture microchips on silicon wafers
measuring 450 millimeters — about the size of a large pizza. The
largest wafers currently used in the chip industry measure 300 mm
across.

Plans by Intel and big rivals like Samsung Electronics <005930.KS>
to eventually expand to 450 mm will allow them to save manufacturing
costs by squeezing more chips on each wafer.

Intel, which on Thursday is due to report is fourth-quarter
earnings, said in November it expects its revenue to be flat in 2014
compared to last year.